The term “house hacking” was first coined by Brandon Turner, a real estate investor and writer, but the concept has been around much longer than that.
Essentially, house hacking is a strategy where you rent out extra space in your primary residence to offset the expenses of homeownership. That means you purchase a property, live in a part of it and then rent out the rest – that way, your roommates or tenants are paying your mortgage at the same time you are reducing your living expenses and building equity.
Some people do this by purchasing a multi-unit property like a duplex, and living in one unit while renting out the rest. This gives you the advantage of being on hand as a landlord while also offsetting some of your costs. But it can be hard to make the number work to your advantage in higher-price markets, where the rent you charge may not be enough to cover the mortgage.
Other people choose to share communal spaces and rent out rooms; often, it’s possible to charge more rent over all by renting out individual rooms than the entire house.
The “hacking” part of this strategy comes from leveraging that equity and the living expenses that are being saved to purchase a second property and repeat, eventually resulting in owning multiple rental properties.
If you are considering this strategy, there are a few things to keep in mind. Zoning rules and safety guidelines may impact how many non-related residents can live in one property. Look closely at the neighbourhood you plan to purchase your property in and if it is close to amenities, public transit or schools, which can help increase the rent you charge. Do the math and see if the equity you are building justifies the cost. And finally, make sure you will be okay with the trade-off of privacy versus return.